1. Federal Government Expenditures
Econ 11/6

2. Warm Up
What do you think the federal government spends the most money on? If you were president of the United States and you had to cut spending on something, what would you cut?

3. Federal Budget
Federal budget: an annual plan outlining proposed revenues and expenditures for the coming year
Mandatory spending: about 2/3, does not need approval from Congress
Examples: Soc Sec, Medicare, Income Security, interest on debt
Discretionary spending: about 1/3, Congress must approve
Examples: Military, welfare programs

4. Establishing the Federal Budget
Step 1: President drafts budget
Help from Office of Management and Budget (OMB), other agencies
Step 2: Budget sent to House of Representatives
Breaks up budget into appropriations bills:
Committees decide on changes
Bills sent to the entire House for approval
Step 3: Budget sent to Senate
Can approve bill or draft its own
Senate bill and House bill must be compromised upon
Step 4: President approves or vetoes

5. Major Spending Categories

6. Major Spending Categories
Social security: historically one of the largest spending category. Helps pay for retired people and those who are disabled
This is largest mandatory spending
National defense: was the largest category in the late 1990s until population growth pushed social security up. Pays for all military costs (wages, supplies, intelligence)
This is the largest discretionary spending

7. Deficits and Surplus
Federal budget deficit: an excess of expenditures over revenues (spending more than they receive in taxes)
Federal budget surplus: expenditures less than revenues (spending less than they receive in taxes)
Generally speaking the US has historically had a budget deficit. We will continue to discuss why this is and how the US government deals with its debts throughout this week.

8. Drafting the Federal Budget
As the OMB your role is to advise the President on drafting the budget year after year. For the 2013 fiscal year, you must work with the following information:
The projected revenues from taxes will be $2.8 trillion dollars.
The projected expenditures (as of right now) will be $3.45 trillion dollars.
You may brainstorm, ask clarifying questions, and check your math with your partner BUT this should be your own ideas and work!
This will be due at the end of the period TOMORROW